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The deal, which requires the approval of a U.S. judge in Santa Ana, California, ends a squabble between Pershing Square and Valeant on whether to settle the investors’ lawsuit and when, according to a statement from Ackman’s firm Friday. In the end, the two companies agreed to divide the payout, with Pershing Square paying $193.75 million toward the settlement and Valeant paying $96.25 million.

“We continue to believe the case had absolutely no merit,” Ackman said. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation.”

Allergan’s shareholders claimed in the lawsuit that they were tricked when Ackman bought their shares with the secret knowledge Valeant was planning a hostile bid. Pershing Square made a paper profit of more than $2 billion on its Allergan investment when Actavis ended up buying the then-Irvine, California-based company, which had rejected Valeant’s takeover offers.

The case had been scheduled to go to trial Jan. 30. U.S. District Judge David Carter at a hearing this month issued a preliminary ruling on Ackman’s and Valeant’s final bid to avoid going before a jury. The judge, who didn’t finalize the decision, rejected their arguments that they were shielded from insider-trading liability by securities law and instead sided with the shareholders on some of the key questions in the case.

"We believe this agreement to resolve the legacy litigation is in the best interests of the company, because it enables us to focus our attention and resources on the transformation of Valeant," Joseph C. Papa, the company’s chairman and chief executive, said in a statement. "Though we always have remained confident in our position and were prepared to try these cases on their merits, this agreement will eliminate disruption to our business."

The Allergan investors who sold common stock during a two-month period in 2014, between when Ackman and Valeant agreed on their joint venture and when Valeant went public with its takeover proposal, will receive $250 million of the settlement, with the remaining $40 million going to investors in Allergan derivatives who filed a separate lawsuit this year.

"This settlement not only forces Valeant and Pershing to pay back hundreds of millions of dollars, it strikes a blow for the little guy who often believes, with good reason, that the stock market is rigged by more sophisticated players," Lee Rudy, a lawyer representing the lead plaintiffs, said in a statement.

Under a litigation management agreement disclosed in February, Valeant would have been responsible for 60 percent of any settlement with the Allergan shareholders. According to Pershing Square’s statement, the hedge fund manager took control over the litigation on Dec. 19 in exchange for agreeing to pay more of the settlement.

Pershing Square had originally set aside $75 million for the lawsuit.

The settlement puts an end to Ackman’s and Valeant’s strained relationship. After the initial profit their partnership made on the Allergan investment, Pershing Square lost $4.2 billion on its subsequent investment in Valeant, and Ackman fell out with the Canadian drugmaker’s former chief executive, Mike Pearson.

“I attribute the loss to a series of decisions that were made largely in 2015,” Ackman said in a March deposition filed in court. “And I don’t think Mike used good judgment in making those decisions. And so my confidence in him as a CEO, you know, was clearly lost.”

The case is In re Allergan Inc. Proxy Violation Securities Litigation, 14-cv-02004, U.S. District Court, Central District of California (Santa Ana).